A major £2.5 billion project to transform one of London's key airports is now under threat due to a dramatic increase in property taxes. Luton Airport, owned by Luton Council, has ambitious plans to construct a brand-new terminal and boost its annual passenger capacity from 18 million to 32 million by 2043.
Tax Burden Threatens Investment
Despite receiving government approval, the expansion's future is clouded by business rate changes announced in last year's Budget. According to recent analysis, the airport's business rate bill is expected to more than double by 2029. Payments to HMRC are projected to surge from just under £7 million this year to a staggering £14.5 million within three years.
This looming tax hike presents a direct challenge to Chancellor Rachel Reeves, whose Labour administration is counting on large-scale infrastructure projects to drive national productivity. A retreat in airport investment would be a significant setback for this growth agenda.
Industry-Wide Concern and Government Response
Luton Airport has stated that any additional tax burden would be "likely to impact" its investment decisions. Officials are urging the government to ensure its policies align with stated ambitions to support airport growth. The airport is participating in an ongoing Treasury consultation on how business rates are calculated for airports, which is due to conclude next month.
The concern is not isolated to Luton. Gatwick Airport is also examining the consequences of its business rates potentially doubling to £140 million by 2029, having previously warned that increases above 40% would jeopardise its investment plans. Similarly, Manchester Airport has indicated it may reconsider a proposed £2 billion investment programme over the next five years.
Warnings of Wider Economic Damage
Karen Dee, chief executive of the industry body AirportsUK, issued a stark warning. She stated that while recent changes to transitional relief were welcome, a over 100 per cent increase in business rates could force airports to review billions in transformational investments. This, she argued, puts thousands of jobs at risk and would damage local economies that rely on airport connectivity, supply chains, and tourism.
Shadow transport secretary Richard Holden criticised the government's approach, saying: "You cannot build a pro-growth economy while taxing the infrastructure that keeps it airborne."
A government spokesperson defended its position, highlighting a £4.3 billion support package designed to cap business rate bill increases at 30% for the largest properties, including airports. They argued that without this intervention, increases could have reached up to 500%.
